International Finance: Greek Financial Crisis


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The Greek Financial Crisis has become a major issue in Greece and in Europe. This slideshow will discuss you with the background, effects, reasons, and future outloo k

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International Finance: Greek Financial Crisis

  1. 1. The Greek Financial Crisis:
  2. 2. The Greek Financial Crisis: The Past  The Facts of the Past:     Joined the EU in 1991 Old Currency: The Dharma Population: 11.2 mil Major Industries: Tourism & Shipping  Reasons of Joining EU     Access to a competitive market Solidarity (Euro connection) Stability Efficiency
  3. 3. The Greek Financial Crisis: 
  4. 4. The Greek Financial Crisis: The Past  Initial Success in Euro Switch  Increase wages, Early retirement,  High pensions, Low interest rates,  Foreign investment  Maastricht Treaty Obligations:  Debt Limit Max. 60% GDP (113% in 2009)  Annual Deficit Max. 3% GDP (14% in 2009)  Reveals 300 bil. debt. Highest in modern history (2009)
  5. 5. The Greek Financial Crisis: The Past
  6. 6. The Greek Financial Crisis: The Past  Major Crisis Factors:  Mismanagement of Funds  Inefficient Public Structure  Trade Imbalances  Govt. & Upper Class Corruption  Tax Evasion (25-30 bil. Euros)
  7. 7. The Greek Financial Crisis: The Present  2010; Greek Gov’t Bonds become “Junk”, Can not privately finance  on 2 May, the Eurozone countries and the International Monetary Fund (IMF) presented a €110 billion bailout loan for Greece. It was based around 3 key points: 1. 2. 3. Implementation of austerity measures. Privatization of government assets worth €50bn by the end of 2015 Structural reforms, to enhance competitiveness.  What is Austerity? Austerity is a government method of covenants with the goal of re-stabilzing its debt deficit. Examples:   Lowered Spending Increased Tax
  8. 8. The Greek Financial Crisis: The Present Results of 2010 bail out  Record increase in unemployment  Abolishment of the trust between the Greek people and the Gov’t.  Greek economic conditions worsened 2011-2012; Bail Out #2  Further implementation of Austerity conditions  All holders of Greek gov’t bonds had to agree to incur a 53% loss (extremely unpopular)  €130 billion  Troika (EU, ECB, IMF) monitor all loans to Greece  Greece to resume using the private capital markets for debt refinance and as a source to partly cover its future financial needs 2013; Speculation of a 3rd Bailout  Rumored that Greece still needs €50 billion from 2015-2020
  9. 9. The Greek Financial Crisis: The Present Fun Facts  Rumors of hypocrisy, national self interest conspiring of EU nations trying to take advantage of Greece  Huge protests from Greek people who feel they are being cheated by lenders and are at war with them.  Greece has lost 40% of its disposable income since crisis began  Greek stock market has dropped 85% in less than 4 years
  10. 10. The Greek Financial Crisis: The Present  Greek currently 160% of GDP, 120% by 2020 (goal)  Unemployment sitting near 30%  Wages last two years have fallen 12%  More than 1.1m jobs lost in the private sector in the past four years  Market rigidities in Greece, including state monopolies, price-fixing by local producers and restricted shopping hours, keep prices of goods higher than elsewhere in the eurozone.
  11. 11. The Greek Financial Crisis: The Future  What would happen if Greece left the Eurozone?  Greece would have the ability to print currency  Could cause other countries to follow Greece out of the Eurozone  Greece’s absence would cause a decrease in value in the Euro  Would face minimal austerity measures
  12. 12. The Greek Financial Crisis: The Future  If Greece stays in the Eurozone and accepts additional bailouts…  Greek bank would continue to take losses and continue to take on more debt  Austerity measures could be unproductive because of high unemployment rates  Private sector will continue to struggle
  13. 13. The Greek Financial Crisis: The Future
  14. 14. The Greek Financial Crisis: The Future  What needs to be done?  Tax structure reform (Lagarde List)  Business regulatory reform  Less regulation to encourage competition  Continue to make efforts to increase tourism  Restore faith in the government
  15. 15. Questions  Do you believe Greece should leave the Euro zone or stay within it?  What do you believe Greece should do to rebuild their economy and to restore faith in the government?  Will they make a full recovery?